2007 Surge in Clean-energy Investment

We received an interesting press release here at Clean Tech Collective today. According to Michael Liebreich, Chairman & CEO of New Energy Finance Limited, 2007 was a record breaking year for public market investment in clean energy.

Here's the lede:

I don't imagine this news is surprising to anyone in this site's community. It does confirm, however, the sense that we have entered a new era in energy-related development and investment. From the 1970's until just a couple of years ago, the race for commercial position and dominance in areas like alternative energy, renewables, efficiency and the like couldn't really get started in this country, largely because of the volatility of oil prices and the availability of cheap coal. While there was no shortage of far-sighted and environmentally-conscious investors who understood that an energy revolution was inevitable, periods of high energy prices boosting the prospects of alternative energy plays were always followed by oil-market free-falls. (Did oil really hover near $10 a barrel in the 90's, or was it a dream?) As a result, next-generation energy companies could find only limited traction with investors, and for good reason.

But now, climate change has drastically altered the business outlook. Where once investors saw a haze-obscured, but potentially ever-receding horizon for a permanent economic imperative for alternative energy, they now see a rapidly approaching brick wall inscribed with the words "Global Warming." Public concern around the developed world has come to critical mass, carrying policies forward on the political flood. Fossil fuels--cheap or not--are broadly deprecated, and there is general agreement that the pressures compelling change are only going to increase.

So now the race to see which companies will dominate each of the relevant sectors can truly begin. We are exiting the era of false starts and beginning a great shake-out. Only hindsight will reveal which players have the right combination of strategic acumen, technological vision, and market weight to emerge on top, but the process is certainly going to be an exciting spectacle.

A few other facets of the press release are intriguing. First, one gets the sense that a surprisingly large portion of the surge in investment is going to non-U.S. companies. I wonder, am I misreading the data, or is this a genuine phenomenon resulting from our backwards energy policies and/or weakness in U.S. manufacturing and R&D?

It's also interesting to note the distribution of new investment. Wind was the big winner, while the biofuel, biomass, geothermal and marine sectors were less robust. To some extent, this perception is skewed by the small time frame of the data set. We are, after all, only comparing 2007 and 2006, and a handful of big deals can make a significant impact on the bar chart. But the relative weakness for biofuels does highlight the dubiousness of the U.S.'s politically motivated drive for corn ethanol. The rest of the world appears to be turning to other options.

And while one would expect Adam Smith's invisible hand to boost the most efficient energy approaches in the long run, serendipity and first-to-market success will certainly give an advantage to some players that they may be able to carry forward even if their technology isn't really superior for the long haul. Is wind getting a leg up on its competitors?

Here's the complete release:

Press Release – for immediate use

16 January 2008

Record-breaking year for public market investment in clean energy

The amount of money raised by clean energy companies on the public markets more than doubled in 2007, as investors clamoured to buy into companies taking measures to combat climate change. The sector’s strong growth was underpinned by strong fundamental drivers, including ever-increasing amounts of legislation, high oil prices, fears over energy security and growing support from consumers.

Clean energy companies raised $21.5bn on public markets in 2007, more than double the previous year’s $10.5bn. The year was dominated by one of the final deals of 2007, the $6.6bn IPO in December of a 20% stake in Iberdrola Renovables (Iberenova), the renewables division of the Spanish utility. The deal cemented the wind sector’s position as the biggest recipient of public market funds in 2007. Twenty three wind companies raised $10.9bn – not only was this almost a tenfold increase on 2006’s $1.57bn raised by 17 companies, but it means the wind sector alone raised more than all the money clean energy companies raised on public markets in 2006. Other significant deals included the $243.2m raised by Chinese wind turbine manufacturer Goldwind Science and Technology in an IPO on the Shenzhen Stock Exchange and the $648m raised on the London Stock Exchange by Hansen Transmissions, the Suzlon-owned gearbox manufacturer.

The solar sector also saw a big increase in funds raised, with investors pumping $6.95bn into 43 groups in 2007 against $3.36bn in 34 transactions the year before. A number of Chinese groups debuted or made secondary offerings on US markets, including solar panel cell maker JA Solar Holdings, which raised $225m on Nasdaq, crystalline silicon module manufacturer China Sunergy, whose Nasdaq Global Market debut raised $94m and LDK Solar, which raised $470m on NYSE, which also hosted the $319m debut of integrated PV manufacturer Tianwei Yingli. In Europe, Taiwanese PV cell manufacturer Motech Industries raised $211m with an IPO in Luxembourg, while Spanish PV module manufacturer Solaria Energia raised $341.5m in an IPO on the Madrid Stock Exchange and Centrotherm Photovoltaics, the PV manufacturing equipment supplier, raised €185m ($263m) in its IPO on the Deutsche Borse. In one of the most significant secondary offers of the year, thin-film solar group First Solar raised $380m to expand capacity and saw its shares rise almost eight-fold for the year.

The amount raised by companies in the efficiency sector nudged up from $737m to $762.68m, including the $124m IPO of smart grid technology provider Comverge and a $112m IPO for smart distribution technology developer EnerNoc. Carbon Markets & Services groups saw investments of $726.1m against $546m in 2006. Power Storage also continued to grow, raising $94.2m in 2007 against $70m the year before.

By contrast, only 13 biofuels companies debuted on the public markets in 2007, bringing in $1.06bn, compared with 30 deals worth $2.94bn in the previous 12 months. It was notable that many deals were outside the US. Ethanol producer Acucar Guarani raised $358m in Sao Paulo while its Brazilian rival Cosan raised $1.05bn with the listing of its Bermuda-based holding company on the NYSE. Meanwhile, China Agri-Industries Holdings raised $413m from its initial public offering on the Hong Kong Stock Exchange. There were also offerings from companies based in Israel, Australasia and Ukraine.

Less money also flowed to the biomass & waste sector, $439m against $510m, while once again sentiment failed to firm on fuel cells – in 2006, 13 companies raised $302m between them, while in 2007, nine companies could only attract $232.45m. There was also a fall-off in funding for geothermal, marine & mini-hydro companies, which raised $314.1m last year, compared with $470m the year before.

The Iberenova deal reinforced Europe’s leading role in public markets investment for clean energy companies. A total of $14.2bn was raised in the EMEA region, more than double 2006’s $6.4bn, although there were fewer deals – 63 against 82 in the previous year. The number of deals in the Americas was almost static – 49 compared with 46 the year before, but significantly more money was raised, from $3.7bn to $5.1bn. The amount of money raised in Asia remained some way behind – but the $2.2bn raised was a massive increase on 2006’s $465m and it happened despite a number of Asia companies listing on European and US markets.

About New Energy Finance:

New Energy Finance is the world’s leading independent provider of research to investors in renewable energy, biofuels, low-carbon technologies and the carbon markets. The company’s research staff of 50 (based in London, Washington, New York, Beijing, Shanghai, New Delhi, Tel Aviv, Cape Town and Perth) tracks deal flow in venture capital, private equity, M&A, public markets, asset finance and carbon credits around the world.

New Energy Finance covers all sectors of clean energy: renewables (wind, solar, marine, geothermal, mini-hydro, biomass); biofuels; energy architecture (supply-side and demand-side efficiency, energy-smart buildings smart distribution, power storage, carbon capture & sequestration); hydrogen & fuel cells; carbon markets and services.

The New Energy Finance Desktop is the world’s most comprehensive subscription database of investors and investments in clean energy. New Energy Finance’s Insight Services provide deep market analysis to investors in Wind, Solar, Biofuels, Biomass, China, VC/PE, Public Markets and the US. New Energy Finance is co-publisher of the world’s first global stock-market index of quoted clean energy companies, the WilderHill New Energy Global Innovation Index (ticker symbol NEX). The company also undertakes bespoke research and consultancy, and runs senior-level networking events.

New Carbon Finance, a division of New Energy Finance, is the world’s leading independent provider of analysis, price forecasting, consultancy and risk management services relating to carbon. It has dedicated services for each of the major emerging carbon markets: European, global (Kyoto) and US, where it covers the planned regional markets as well as potential federal initiatives.

Michael Liebreich, Chairman & CEO
New Energy Finance Limited
New Penderel House
283-288 High Holborn
London WC1V 7HP

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